How to Monitor Transactions in Saudi Arabia: Regulation & Best Practices

In Saudi Arabia, where the financial system is rapidly digitizing under Vision 2030, regulators and institutions are placing heightened emphasis on monitoring transactions effectively and in real-time.

Transaction monitoring helps banks and financial institutions detect unusual activity, mitigate risk, and stay compliant with national and international regulations. It is especially critical in the Kingdom, which sits at the crossroads of global trade, finance, and regional geopolitical complexities.

Regulatory Landscape in Saudi Arabia

Effective transaction monitoring in Saudi Arabia is grounded in a robust regulatory and supervisory framework designed to combat money laundering and terrorism financing. Several key authorities and legal instruments define how financial institutions are expected to implement and operate monitoring systems.

1. Saudi Central Bank (SAMA)

The Saudi Central Bank (SAMA) is the primary financial regulator for banks and other licensed financial institutions in the Kingdom. It sets forth AML/CFT compliance expectations, including transaction monitoring obligations, through detailed regulatory frameworks and circulars.

The bank’s AML regulations require financial institutions to implement risk-based transaction monitoring systems, ensure timely reporting of suspicious activities, and retain monitoring records for at least 10 years.

2. Saudi Financial Intelligence Unit (SAFIU)

The SAFIU, operating under the Presidency of State Security, is responsible for receiving and analyzing Suspicious Transaction Reports (STRs) and disseminating findings to law enforcement or regulatory bodies.

SAFIU manages the platform for STR submissions, developed by the United Nations Office on Drugs and Crime (UNODC).

It also participates in regional and international AML/CFT collaborations, including MENAFATF.

3. Core AML/CFT Legal Frameworks in KSA

1. Anti-Money Laundering Law (2017, amended)

Saudi Arabia’s AML Law outlines the legal basis for all AML-related practices, including customer due diligence, record-keeping, and ongoing monitoring.

• Article 8 mandates that institutions implement internal systems that enable continuous monitoring of transactions and the detection of unusual or suspicious patterns.
  

• Failure to establish effective monitoring mechanisms can result in administrative penalties, including fines and license suspension.
  

2. The Saudi Central Bank Implementing Regulations (2022 Update)

In 2022, the Saudi Central Bank issued updated Implementing Regulations on AML/CFT, with sharper expectations on technology-driven monitoring and scenario testing.

Key highlights:

• Institutions must apply automated transaction monitoring systems that reflect each customer’s risk profile.
  

• Periodic review and recalibration of system rules and thresholds are required.
  

• Integration with eKYC, fraud prevention systems, and case management tools is recommended.
  

3. Alignment with International Standards

Saudi Arabia is a member of the Financial Action Task Force (FATF) and the Middle East and North Africa Financial Action Task Force (MENAFATF). Its AML framework is designed to align with the FATF’s 40 Recommendations.

• In 2018, FATF rated Saudi Arabia as “Compliant” or “Largely Compliant” on most AML/CFT technical criteria. However, the evaluation highlighted the need to improve effectiveness of STR reporting and monitoring of non-bank sectors.
  

Key Takeaways:

• Monitor regulatory updates from the Saudi Central Bank and SAFIU.
  

• Ensure your Transaction Monitoring System complies with both national laws and FATF principles.
  

• Maintain strong audit trails for all monitoring and reporting activities.

Core Components of Transaction Monitoring in Saudi Arabia

An effective transaction monitoring program is more than just software, it is a dynamic, risk-driven framework that combines people, processes, and technology.

Article (13) of the Anti-Money Laundering Law and Article (69) of the Law on Combating Terrorism Crimes and Financing state that “ the financial institution’s responsibilities to continuously monitor transactions, documents and data to ensure that they are consistent with the information the financial institution has about the customer or business relationship. These responsibilities also include giving particular attention to unusual transactions and activities, especially when they involve high ML/TF risks.”

1. Customer Risk Profiling

Effective monitoring begins with establishing detailed risk profiles for each customer. These profiles consider factors such as:

• Source of funds
  

• Nature of business (e.g., cash-intensive)
  

• Jurisdictional risk (domestic vs. high-risk countries)
  

• Transaction channels used (e.g., online, wire transfers, cash deposits)
  

The Saudi Central Bank emphasizes that monitoring systems must be calibrated to reflect these individualized risk scores.

2. Scenario-Based Rules and Thresholds

Institutions must implement rule-based scenarios to detect red flags. These can include:

Thresholds should be dynamic and tailored to the customer’s expected behavior, not one-size-fits-all.

3. Alert Generation and Case Management

Once a transaction triggers a rule, it generates an alert, which must then be:

• Reviewed by AML analysts
  

• Investigated using internal/external data
  

• Escalated to a case if warranted
  

• Documented for regulatory review
  

Best practices include using workflow automation, auditable notes, and risk ratings for each alert/case.

4. Link Analysis and Network Monitoring

More advanced systems incorporate link analysis tools to connect seemingly isolated transactions or accounts. These tools help:

• Detect shell entities or related parties
  

• Uncover transaction laundering schemes
  

• Analyze money flow across multi-bank networks
  

5. STR Filing and Audit Trail

If an alert is deemed suspicious, it must be reported to the Saudi Financial Intelligence Unit. According to the Saudi AML Law:

“ The financial institution shall immediately and directly inform the SAFIU upon suspicion or the presence of information or reasonable grounds to suspect that a customer’s behavior is related to ML/TF acts. If the financial institution submits a report to the SAFIU, it shall respond to and provide the SAFIU with any additional information that it requests directly in order to analyze the submitted report.

The financial institution shall report all suspicious transactions, including unsuccessful attempts to carry out transactions, if there are reasonable grounds for suspicion, regardless of the transaction’s value.”

Practitioner Checklist: Core Components

Why is AML Transaction Monitoring Critical in Saudi Arabia?

Saudi Arabia is uniquely positioned as a regional financial hub and a key player in cross-border finance, Islamic banking, and oil and commodities trading. These attributes, while economically advantageous, make its financial system a potential target for money laundering schemes.

1. Cross-Border Exposure: Saudi Arabia’s heavy engagement in international trade and foreign worker remittances exposes its financial system to unique laundering risks, for example, remittance corridors are frequently exploited for layering and smurfing.

2. Evolving Threat Landscape: The Saudi Central Bank and SAFIU have both flagged a rise in:

• Digital laundering techniques (e.g., through fintech apps, e-wallets).

• Fraud convergence, where stolen funds from scams are funneled into high-risk regions.

• Trade-based money laundering (TBML) in sectors like construction, oilfield equipment, and gold trading.

Monitoring these typologies requires more than rule-based alerting, it demands scenario tuning and typology-informed detection models.

3. FATF & MENAFATF Alignment: In 2018, FATF's Mutual Evaluation of Saudi Arabia acknowledged the country's robust regulatory structure but emphasized the need to improve STR quality and targeted detection scenarios. Since then, The Saudi Central Bank has taken active steps to:

• Enhance expectations on scenario development.

• Encourage use of machine learning models with validation logic.

• Demand regular audits of alert effectiveness.

Best Practices for Effective Monitoring & STR Reporting in Saudi Arabia

In this section, we explore the best ways to monitor transactions and report anything suspicious, based on the rules and expectations in Saudi Arabia.

1. Implement a Clear Risk-Based Approach (RBA): The Saudi Central Bank Rulebook states financial institutions must develop risk-based monitoring measures, focusing enhanced resources on high-risk customers/transactions while applying simplified monitoring for low-risk ones.
   

2. Integrate Transaction Monitoring with Core Systems and KYC/CDD Data: Monitoring tools should be fully integrated with core banking and customer due diligence systems for context-rich alert analysis. Disconnects reduce STR quality and narrative strength.
   

3. Deploy Automated, Technology-Driven Systems: Manual monitoring is insufficient: The Saudi Central Bank mandates use of effective electronic systems capable of real-time or near real-time monitoring.
   

4. Update and Review Detection Scenarios Regularly: Institutions must develop transaction monitoring indicators and typologies responsive to evolving money laundering techniques, updating them frequently based on internal/external intelligence.
   

5. Conduct Annual System Testing & Validation: Transaction monitoring tools must be tested periodically to ensure effectiveness, with results documented and system enhancements implemented as needed.
   

6. Ensure Proper Governance & Senior Oversight: Policies, scenarios, and STR processes must be approved at senior management level. Key control points should be overseen by a designated governance body, such as a board member or CRO.
   

7. Train Staff and Establish Defined STR Escalation Pathways: Personnel must be trained according to their roles. Suspicious transaction escalation should follow documented processes, with confidentiality protections in place.
   

8. Maintain Comprehensive Audit Trails & Documentation: All monitoring steps, alert reviews, investigation notes, and STR rationale must be retained and accessible for at least 10 years for regulatory review.
   

9. Integrate STR Submission with goAML Standards: TM systems should support structured STR output (XML) aligned with SAFIU requirements, including customer background, alert context, and evidence.
   

How to Monitor Transactions in Saudi Arabia

The FOCAL platform in Saudi Arabia helps financial institutions strengthen their anti-money laundering efforts and improve transaction monitoring. It screens transactions against global sanctions and high-risk lists to spot potential risks quickly. Institutions can also add their own internal watchlists for extra security.

FOCAL monitors transactions in real time to catch suspicious activity immediately and enables institutions to set risk levels based on their needs. This helps Saudi financial institutions stay compliant with local laws and regulatory requirements.

FAQs

Q1. Is transaction monitoring a legal requirement in Saudi Arabia?

Yes. Under the Anti-Money Laundering Law (Article 13) and relevant regulations issued by the Saudi Central Bank (SAMA), financial institutions must continuously monitor customer transactions and activities. Manual methods alone are insufficient, effective electronic systems integrated with core banking platforms are required.

Q2. What counts as a suspicious transaction?

A transaction is deemed suspicious if it gives rise to reasonable grounds to suspect it involves money laundering. Examples include:

• Transactions that don’t fit a customer’s normal profile (e.g., sudden large deposits or withdrawals)

• Structuring or frequent small transfers to evade detection

• Using third parties/intermediaries without valid justification

• Refusal to disclose identity or source of funds

• Transactions linked to high-risk jurisdictions, sanctioned individuals, or PEPs

• Rapid fund movement across multiple accounts or shell companies

Q3. Who must carry out transaction monitoring in Saudi Arabia?

In Saudi Arabia, transaction monitoring is a legal obligation for all entities subject to Anti-Money Laundering and Counter-Terrorist Financing (AML/CTF) regulations. This includes financial institutions regulated by the Saudi Central Bank (SAMA), such as banks, insurance companies, financing firms, money exchangers, and payment service providers.

It also applies to capital market entities regulated by the Capital Market Authority (CMA), including brokerage firms, asset managers, and investment advisors. Additionally, designated non-financial businesses and professions (DNFBPs) under the Ministry of Commerce such as real estate brokers, dealers in precious metals and stones, lawyers, notaries, accountants, and company service providers are also required to monitor transactions.

Virtual Asset Service Providers (VASPs), including cryptocurrency exchanges and custodial wallet providers, must comply as well. All covered entities must implement ongoing, risk-based transaction monitoring, maintain internal controls, and report suspicious activity to the Saudi Financial Intelligence Unit (SAFIU).